Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 247914
Dear [Client]:
Subject: GST/HST interpretation - Eligibility for the purpose-built rental housing rebate and duplexes
Thank you for your correspondence of June 24, 2024, concerning […][the Company]’s eligibility for the purpose-built rental housing (PBRH) rebate and the application of the goods and services tax/harmonized sales tax (GST/HST) to duplexes.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand that [the Company] is registered for GST/HST purposes. [The Company] is considering constructing a residential building that will be located on a single parcel of land. The building will have two residential units on the main floor with a common wall and there will be two residential units in the basement level also having a common wall. Each unit will be self-contained and each unit will have a separate entrance. Each unit, once constructed, will be rented long-term to individuals as their place of residence.
It is your understanding that a duplex (one unit above and one unit below with a common wall) is considered to be a single unit residential complex for GST/HST purposes. The building [the Company] is considering to construct has units that are side by side with a common wall.
INTERPRETATIONS REQUESTED
You would like to know:
1. If the structure [the Company] is considering to construct would qualify for the PBRH rebate.
2. If a duplex is considered to be a single unit residential complex.
INTERPRETATIONS GIVEN
Interpretation 1
Generally, a GST/HST registrant who constructs a new residential rental property on land that the person owns (the owner referred to as a “builder” of a residential complex) and then supplies the units in the building to individuals as a place of residence under long-term leases is entitled to claim an input tax credit for the GST or HST payable on the costs to construct the building. In addition, the builder is deemed to have made and received a taxable sale of the complex and to have paid the GST/HST on the fair market value of the complex (referred to as a “self-supply”). The builder is required to account for this GST/HST at the later of the time that the complex is substantially completed and the time when a unit in the complex is rented. Further information on this requirement is included on page 10 of the guide RC4052, GST/HST Information for the Home Construction Industry under the heading “What is a self-supply?”.
PBRH rebate
The PBRH rebate is available to a builder of purpose-built rental housing for 100% of the GST (or the federal part of the HST) that is deemed to have been paid and collected by the builder on the self-supply of the complex where certain conditions are met. One of the conditions for rebate eligibility is that, generally, the construction of the purpose-built rental housing must begin after September 13, 2023 but before 2031 and must be substantially completed before 2036.
In general, the property that the builder received as a self-supply must be a multiple unit residential complex where:
- the multiple unit residential complex includes at least four residential units and at least four of those units each contains private kitchen facilities, a private bath and a private living area, or at least ten residential units; and
- 90% or more of the residential units that form part of the multiple unit residential complex are qualifying residential units held for the purpose of making certain exempt supplies of the unit or making exempt supplies that include giving possession or use of a unit to a person for occupancy of the unit as an individual’s place of residence.
A “multiple unit residential complex” is defined as a residential complex that contains more than one residential unit, but does not include a condominium complex.
A “single unit residential complex” is generally a residential complex (other than a residential condominium unit) that does not contain more than one residential unit.
A “residential complex” is generally defined to include that part of a building in which one or more residential units are located together with appurtenances and related land.
A “residential unit” generally includes a detached house, semi-detached house, rowhouse unit, condominium unit or apartment that is occupied or is intended to be occupied by an individual as a place of residence or lodging.
Generally, a building on land registered under one property title where there are four residential units in the building (such as the structure [the Company] is considering constructing) would be a multiple unit residential complex rather than a single unit residential complex.
Where each of the four residential units in the multiple unit residential complex:
- contains private kitchen facilities, a private bath and a private living area,
- is a qualifying residential unit used for the purpose of leasing each unit to an individual as their place of residence for at least a year, and
- meets all other conditions for the PBRH rebate, including the timing of when the construction of the residential complex and is substantially completed,
a PBRH rebate may be available for the tax payable by the builder on the self-supply of the residential complex.
Further information on the PBRH rebate including the eligibility requirements is available in GST/HST Notice 336, Purpose-built Rental Housing Rebate.
Interpretation 2
Generally, a duplex is a building that contains two residential units under one legal title. Such a building could have a residential unit on the main floor and another unit above that unit. As we discussed […], a building containing two residential units where the two units are side by side with a common wall could be located on two legal titles and we agree that this would not be a duplex. However, it is common for a building containing two residential units where the two units are side by side with a common wall to be located on one legal title. Such a building would generally be considered to be a duplex. The building that [the Company] is considering to build would not be a duplex where it contains four residential units on a single legal title.
In general, there is a special rule, for purposes of the GST/HST new residential rental property (NRRP) rebate, that where a building only contains two residential units, the property is considered to be a single unit residential complex instead of a multiple unit residential complex. However, this rule would not apply to the building that [the Company] is considering to construct where it is on a single legal title and contains four residential units.
Provincial PBRH rebate
The Government of [Province A] has introduced a provincial PBRH rebate for 100% of the provincial component of the HST for new purpose-built rental house situated in [Province A]. Where conditions for the federal PBRH rebate are met for a particular residential complex, a builder of the residential complex may be eligible for this provincial rebate. The conditions for the federal PBRH rebate are explained above.
GST/HST NRRP rebate […]
Where a builder of a residential complex is not entitled to claim the federal PBRH rebate, it may be entitled to claim a GST/HST NRRP rebate for the GST (or federal part of the HST) that it is deemed to have paid and collected on the self-supply of newly constructed rental property. The GST/HST NRRP rebate is generally 36% of the GST (or federal part of the HST) that it is deemed to have been paid and collected on the self-supply of a residential complex, subject to a maximum amount of $6,300 for each qualifying residential unit. For qualifying residential units with a fair market value between $350,000 and $450,000, the rebate for some of the GST (or federal part of the HST) is gradually reduced. No rebate is available with respect to a particular unit if the unit has a fair market value of $450,000 or more.
[…].
Please refer to the guide RC4231, GST/HST New Residential Rental Property Rebate for further information […].
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretations given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretations or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 306-914-1122.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Ron Litzenberger
Industry Sector Specialist
Real Property Unit 1
Financial Institutions and Real Property Division
GST/HST Rulings Directorate
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